NESG releases action plan to manage Nigeria’s ‘rising debt’ burden
...says Nigeria accounts for 50% of West Africa's debt
The Nigerian Economic Summit Group (NESG) has again raised concerns over the ‘rising’ debt profile in the country and urged the government to adopt integrated debt, revenue and expenditure strategies to ensure debt sustainability and save the country from the debt trap.
This was part of recommendations contained in the report by the Debt Management Roundtable (DMR)– an initiative of NESG and Open Society Initiative for West Africa (OSIWA). The full report on debt management and sustainability in ECOWAS was formally presented to Nigeria’s Debt Management Office (DMO) for possible adoption and implementation Thursday.
The report proposes a 10-point action plan under an integrated strategy for revenue optimisation, expenditure efficiency and debt management. It provided some background on the ECOWAS fiscal landscape and public debt portfolio, including several policy recommendations for debt sustainability and key performance indicators.
The presentation, held at the National Debt Management Office in Abuja, was attended by stakeholders from Nigeria’s public and private sectors, including Dr Abel Essien, ECOWAS Commission; Paul Adeyeye, OSIWA and Zainab Mangga, the International Monetary Fund (IMF) Country Office.
‘Laoye Jaiyeola, NESG CEO, stressed that Nigeria is a focal point for debt sustainability in the ECOWAS region. He noted that the country accounts for 50 percent of the region’s total debt, and 67 percent of the GDP. According to Jaiyeola, this behoves on Nigeria to adopt more sustainable strategies to create the required fiscal space for national development, with positive knock-on effects in other ECOWAS nations.
He highlighted the depth of research and sub-regional collaboration involved in the production of the report, as well as its significance for sustainable debt management across the region if implemented.
“At the NESG, our mission is an open, inclusive, sustainable and globally competitive economy. We champion sustainable debt management because unsustainable public debt accumulation is inimical to economic growth, not only in Nigeria but ECOWAS as a whole,” Jaiyeola said.
Taiwo Oyedele, the DMR Chairman, identified corruption in public spending, insecurity, geopolitical challenges, resource overdependency, and a shallow tax base as some major drivers of unsustainable debt.
“The DMR report is holistic and includes workable recommendations that, if adopted, can prevent West Africa from getting into a debt trap. Debt in and of itself is not a bad thing. It is what we do with the debt that really counts. So how can we begin to apply the resources that we make – whether internally generated or money borrowed – in an efficient manner to promote productivity and prosperity for our people? The report provides answers that should help steer Nigeria and other ECOWAS countries towards debt sustainability,” Oyedele said.
In her keynote address, Patience Oniha, the director-general, DMO, said the timing of the launch of the report could not have been more appropriate with the global debt levels already rising pre-COVID-19 and still growing since the COVID-19 pandemic started in the year 2020.
“Concerns around debt sustainability have expectedly been heightened. According to the World Bank’s World Economic Outlook. Globally, sovereign debt grew from 49.1 percent of GDP in 2014 to 57.9 percent in 2019, and in sub-Saharan Africa, from 35.1 percent of GDP in 2014 to 55.4 percent in 2019.’The respective figures for 2021 were 66.7 percent and 60.3 percent,” Oniha said.
“The indications are that the trend will continue as the economic consequences of COVID-19 may linger for a longer period, coupled with the increased economic pressures in the form of rising inflation from higher food and energy prices caused by the Russia-Ukraine war. The IMF projects in its World Economic Outlook for April 2022 that the average Debt to GDP Ratio in West Africa is expected to rise to 67.2 percent in 2022 from 56.4 percent in 2019,” she added.
Inaugurated in March 2021, the DMR was tasked with providing viable alternatives and recommendations that government can apply to ensure the public debt is sustainably managed. The urgency of the initiative was in response to growing concerns over rising debt profile in major countries including Nigeria and possible spillover effects to other ECOWAS economies if left unchecked.